Output disruptions drive China Mg prices to fresh highs

Chinese magnesium metal prices have refreshed record highs on continued output suspensions in the main production hub of Fugu county, Yulin city in northwest China's Shaanxi province.

Prices for 99.9pc grade metal were assessed at 60,000-61,000 yuan/t ($9,231-9,385/t) ex-works today, the highest since November 2006 when Argus launched this assessment, up by 36.9pc from Yn44,000-44,400/t on 17 September.

The Fugu county government has ordered all 35 magnesium producers to suspend production by the end of 22 September to reduce energy consumption. Yulin city has more than 50 magnesium producers with most of them located in Fugu county. Magnesium output in Yulin city totalled 381,900t in January-August, up by 9.9pc from a year earlier, data from Yulin city's statistics bureau show.

Many magnesium producers have suspended offering prices following the output disruptions. The rising magnesium feedstock prices have also weighed on production in the downstream industries.

China's titanium sponge output fell to 11,200t in August, down by 1,200t or 9.7pc from July when it produced 12,400t, according to Argus data. The reduction is expected to continue in September because of profit losses from higher prices for magnesium feedstock.

Export firms have found it difficult to offer prices to seaborne buyers in light of rising domestic prices and potential supply disruptions. Argus-assessed export prices rose to $9,700-9,800/t fob today, the highest since 2002 when it was launched, up by 40.7pc from $6,900-6,960/t fob on 17 September.

"We have suspended quoting prices as we are unsure how much the prices will rise further," said a Shanxi-based export trader who expressed concern that some suppliers could cancel their supply contracts.

Prices are likely to continue their rally as supplies remain tight in the rest of this year, with magnesium smelters in other production regions including Shanxi, Ningxia, Inner-Mongolia and Xinjiang also facing energy consumption reduction targets, according to market participants.

China is a key global magnesium producer, with its metal output up by 4.6pc from a year earlier to 494,100t during January-July, data from the China Nonferrous Metals Industry Association show. Production in Shaanxi grew by 12.3pc from a year earlier to 344,200t for January-July.